Is All "Skin in the Game" Fair Game? The Problem With "Non-Preferred" Generics

The authors comment on the growth of drug plans with tiers for "non-preferred" generics, and argue that most are inconsistent with established principles of formulary design.

Published Online: September 17, 2014

Gerry Oster, PhD, and A. Mark Fendrick, MD

Many patients are now encountering much higher co-pays for generic drugs that have been designated “non-preferred” by their insurers, including those recommended as first-line treatment in evidence-based guidelines. For some diseases, in fact, many insurers have no “preferred” generic medicines, effectively rendering the diseases themselves “non-preferred.” Designation of clinically important generic medicines as “non-preferred” without ensuring that patients have access to therapeutically equivalent “preferred” drugs runs counter to established principles of formulary design, may increase other healthcare costs, and ultimately may undermine emerging payment reform initiatives.

The new blockbuster drug sofosbuvir (Sovaldi) is offering hope to many patients with hepatitis C, but treatment is expensive and many insurers are demanding that patients shoulder a large portion of the cost. The demand that patients pay a larger share of their drug costs, however, is not limited to expensive new medicines. In fact, many patients are now facing substantially higher co-pays for various generic drugs that their insurers have designated “non-preferred,” often including those recommended as first-line treatment in evidence-based guidelines for hypertension, diabetes, epilepsy, schizophrenia, migraine headache, osteoporosis, Parkinson’s disease, and human immunodeficiency virus (HIV). We are concerned about this relatively recent development.

For many years, most insurers had formularies that consisted of only 3 tiers: Tier 1 was for generic drugs (lowest co-pay), Tier 2 was for branded drugs that were designated “preferred” (higher co- pay), and Tier 3 was for “nonpreferred” branded drugs (highest co-pay). Generic drugs were automatically placed in Tier 1, thereby ensuring that patients had access to medically appropriate therapies at the lowest possible cost. In these 3-tier plans, all generic drugs were de facto “preferred.” Now, however, a number of insurers have split their all-generics tier into a bottom tier consisting of “preferred” generics, and a second tier consisting of “non-preferred” generics, paralleling the similar split that one typically finds with branded products. Co-pays for generic drugs in the “non-preferred” tier are characteristically much higher than those for drugs in the first tier.

To better understand coverage policies in plans with 2 tiers for generic drugs, we identified several such offerings, including both commercial plans and those under the Medicare Part D program, via an informal search of the Internet. For 6 such plans, we examined coverage policies for 10 widely used drugs—all generically available—that are recommended as first-line treatment in current evidence-based guidelines (Table).

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While 2 of the plans provide access on a “preferred” basis to all of the medicines we considered, 1 or more of the drugs are “non-preferred” in all of the remaining plans. Metformin, for example, is a “non-preferred” drug in 1 plan, despite being a first-line treatment for type 2 diabetes mellitus. Two plans have no “preferred” generic anticonvulsant drugs; 3 plans have no “preferred” generic antipsychotic medicines; levodopa is designated a “non-preferred” agent in 3 plans; 4 plans have no “preferred” generic triptans (for migraine headache); and all generic antiretrovirals are Tier 2 agents in 4 plans. When there are no “preferred” generics from which clinicians and patients with particular diseases can choose, it may be argued that the diseases themselves effectively are “non-preferred.”